Monday, April 25, 2011

We have Private Debt Crisis in Canada: the Liberals Need to Point this out

Tuition costs, child care costs, and housing costs are all going up way faster than the rate of inflation and on the flip side of things wages for a good chunk of the population have been frozen in real terms for decades.

Now what is true for Canada is true for most of the Western world. However, things are going down hill a lot faster in Canada than most other Western countries. Instead of introducing policies to curb the out of control costs of the aforementioned, Harper has either done nothing or he has introduced policies that have made things worse. Take housing. The cost of housing gone through the roof since 2006 and the main reason for that is the Conservative government decided pour fuel on an already red hot real estate market. The Conservatives extended the mortgage amortization period from 25 years to 30 years in February 2006, extended it to 35 years in July of 2006 and extended it yet again to 40 years in November 2006 During this period they also reduced the needed down payment on second properties from 20% to 5% and allowed for 0 down on one's primary residence. Now in fairness to Flaherty, ever since the down turn he has been scrabbling to undo some of the damage his past actions have done. Flaherty first reduced amortization period from 40 years to 35 and again mandated a 20% down payment on secondary properties and 5% on primary properties in October 2008 and on March 18th he reduced the maximum amortization period to 30 years. Never once acknowledging that it was he who raised the amortization period to begin with, Jim Flaherty has repeatedly over the course of the last 2 and half years that reducing the amortization and increasing the minimum downplayment was the right thing to do. "In 2008 and again in 2010, our government acted to protect and strengthen the Canadian housing market," The problem is it is too little too late. The best Flaherty and Conservatives can do is prevent further damage. Weather it be Bloomberg, Paul Krugman and, if you read between the lines, Mark Carney many are worried that Canada is headed for a crash that would drive Canada deep into debt. For one thing, since 2006 Canadian mortgage and housing corporations liabilities have gone from 100 billion to 500 hundred billion. If the housing bubble bursts and Canadians start defaulting on their mortgages, the Canadian tax payer will be picking up the tab. The Canadian government guarantees all that debt.

Wages are another example. The Conservatives decision to allow in a huge number of unskilled guest workers into Canada has hurt workers whose wages have been frozen in real terms of decades. To add insult to injury, Conservatives allowed temporary foreign workers to be brought by Gordan Campbell to work on projects associated with Canada's Action Plan. This meant that money that was designed to stimulate the BC economy was instead stimulating the recovery in Mexico instead. Most of the these workers were from Mexico.

Of course, when it comes to public spending, outside of Canada's Action plan the Conservatives have increased spending in areas (e.g., the military and corrections) that offer no direct financial benefit at all to Canadians.

The Liberals need to drive this point home by pointing out in ads just how much college tuition, housing and child care have gone up since 2006.